State Supreme Court Justice Douglas McKeon announced that after lengthy negotiations, the parties "came together and put terms of a settlement on the record." The amount of the settlement was kept confidential.
The lawsuit stemmed from a May 2011 hotel suite encounter that also spurred criminal charges, forced Strauss-Kahn's resignation from the IMF and cut off his potential candidacy for the French presidency.
The housekeeper, Nafissatou Diallo, a 33-year-old from Guinea, told police Strauss-Kahn forced her to perform oral sex and tried to rape her after she arrived to clean his suite. The 63-year-old Strauss-Kahn, who has since separated from his wife, has said what happened was "a moral failing," but was consensual.
The criminal case was dropped after prosecutors said Diallo had credibility problems.
She said she always told the truth about what happened between the two and would press her claims in the lawsuit. Strauss-Kahn called the suit defamatory and countersued for $1 million.
Strauss-Khan did not attend the hearing on Monday. Diallo, her hair covered by a leopard-print scarf, looked composed and resolute as the deal was announced.
"Ms. Diallo is ready to move on," her attorney Kenneth Thompson said afterward.
Strauss-Khan's attorney, William W. Taylor III, thanked the judge.
After Diallo came forward, other sexual allegations emerged against Strauss-Kahn, who had been known as a womanizer but largely viewed as debonair.
French judges are to decide by Dec. 19 whether to annul charges linking him to a suspected prostitution ring run out of a luxury hotel in Lille. He acknowledges attending "libertine" gatherings but says he didn't know about any women getting paid to participate.
Another inquiry, centered on allegations of rape in a hotel in Washington, D.C., was dropped after French prosecutors said the accuser, an escort, changed her account to say she wasn't forced to have sex.
And French prosecutors also have looked into writer Tristane Banon's allegations that Strauss-Kahn tried to rape her during an interview in 2003, a claim she made public after his New York arrest and he called called imaginary and slanderous. Prosecutors said they believed the encounter qualified as a sexual assault, but the legal timeframe to pursue her complaint had elapsed.
The Associated Press does not name people who report being sexually assaulted unless they come forward publicly, as Diallo and Banon have done.
Associated Press Writer Tom Hays in New York contributed to this report.